Arizona is a community property state for purposes of divorce, which means that all marital property must be divided equitably, including a pension and retirement plan. Because there are many types of retirement assets that fall under different rules and regulations, it is wise to consult with an experienced divorce attorney.
At Cohen Family Law, we assist clients with all aspects of divorce and work to protect their property rights. Given that a pension or retirement plan can be a substantial asset in a divorce, arriving at an equitable distribution can be complicated. Let our experienced family law attorneys guide you through the process and help protect your financial future. Contact our Phoenix office today to schedule a consultation.
Types of Retirement Assets Subject to Division
In Arizona, retirement assets are considered community property, but determining how they will be divided depends on the type of plan. Generally, the two most common types of retirement plans are a “defined contribution plan” and a “defined benefit” plan.
- Defined contribution plan — This is a plan in which you invest money that appreciates over time, such as a 401(k), IRA, or Roth IRA. In a 401(k), for example, employees and employers make contributions to the plan which are then invested for the benefit of the employee. The plan’s value is based on the investments’ performance. In a divorce, the non-contributing spouse is entitled to an equitable share of the account’s value.
- Defined benefit plan — This is an employer-sponsored retirement plan that provides a specific benefit at a certain age, such as a pension. Benefits are typically based on factors such as salary and years of service. In a divorce, the non-enrolled spouse may be entitled to a share of the value of the account or monthly pension payments, depending on the terms of the plan.
Division of Retirement and Pension Benefits in an Arizona Divorce
If one spouse is enrolled in a private retirement plan, the non-enrolled spouse must file a special court order known as a Qualified Domestic Relations Order (QDRO) to ensure that the retirement assets are included in the marital property distribution. The QDRO must adhere to the requirements of federal law — the Employee Retirement Security Act (ERISA).
Once these requirements are met, the court will issue the QDRO which instructs the plan administrator on how to divide the community property portion of the plan. In the alternative, the parties may agree that the non-enrolled spouse will receive other marital assets equal in value to the retirement assets he or she would have received.
Preparing a Qualified Domestic Relations Order
Although QDRO forms are available, it takes a skilled divorce attorney to prepare an order that complies with ERISA and meets the plan administrator’s requirements. At a minimum, the QDRO must include:
- Names and addresses of the plan participant and alternate payee
- The amount or percentage of the benefit to be paid to the alternate payee
- The method for calculating that amount or percentage
- The number of payments or time period covered by the QDRO
Obviously, the spouse who earned the retirement benefit is referred to as the participant, while the individual who receives a share of the benefit is known as the alternate payee. It is important to note that the order does not become “qualified” until the plan administrator approves it. If the order is rejected, however, a new one must be filed with the court and resubmitted for approval by the administrator.
If the order is approved, the alternate payee typically begins receiving benefits when the employee spouse retires. Finally, there are different types of domestic relations orders that apply to retirement plans for municipal, state, and federal employees, including those covered under the Arizona State Retirement System (ASRS).
How Cohen Family Law Can Help with Divorce and Pension
If you are considering divorce, it is crucial not to overlook pension or retirement benefits to which you may be entitled as part of the settlement. To claim your legal right to these retirement assets, the QDRO must be prepared and filed with the court while your case is proceeding. The order must be completed correctly and meet the requirements of ERISA and the plan. Our experienced Arizona divorce attorneys will:
- Review the requirements of the retirement or pension plan
- Calculate the percentage of distributions that you may be eligible to receive
- Prepare and file the QDRO with the court
- Submit the order to the plan for approval
We will also work with you to understand the potential tax liabilities of dividing retirement assets and determine whether you may be entitled to survivor’s benefits should your spouse die after the divorce.
Contact Our Experienced Arizona Divorce and Pension Attorneys
Dividing pensions and retirement plans in a divorce can be complicated. Trust Cohen Family Law to stand by you during this difficult time and make sure your interests are protected. Contact us today to learn how we can help.